Mastering Mindset for Optimal Risk Management

Bob Iaccino , Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Friday from 11am EST, as our Risk Management educator.

With 30 years experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has the ability to breakdown the key fundamentals of risk management, in a way that retail traders can understand and use to get actionable insights to bring into their own trading.

Below are some excerpts: questions and answers from a recent live session. If you’d like to save your seat to watch and participate in the next session, register here. Let’s move into the Q & A....

How do you differentiate between a bad decision and a bad outcome in day trading?

If you think that a loss was a bad trade then you’re setting yourself up for constant negativity and another loss because you’re looking for ways to fix that loss.

If I had a trading system that wins 75% of the time and when it wins it wins $2 for every $1 you risk, you’re going to want to join me in trading that system.

It’s important to note that you’ll still lose. There are still losers and that’s the complimentary probability to the wins.

Your question has to become: did I follow the process correctly? If you followed the process correctly and lost money, it’s still a good trade. If you followed the process and made money, it’s the same level of ‘a good trade’.

If you try to remove your losers out of the process, you’ll take away winners at the same time. It always happens. Even mathematically, it must happen.

What role does continuous learning and adaptation play in maintaining psychological resilience in trading?

It’s critical to continue learning and adapting when you’re not trading. Firstly, you should always be learning - and by learning I mean you should be reading books, talking to traders and successful people to take in extra knowledge.

You also have to be honest about the process of what you’re learning and whether it fits your mindset as a trader. You’ve also got to evaluate your process: where is it weak? Not, where does your process lose money. I can’t stress that enough.

Are there any mental exercises or routines you follow to sharpen your risk management skills?

Number 1: I always have a stop loss. The ideal situation is never to increase risk, only reduce it. The best time to walk away from a trade is when your risk is defined already.If you live cent by cent, tick by tick, decimal by decimal and candle by candle, you’ll be living a horrible life. You want to be able to put on a trade and walk away.

In terms of my mental health I read non-fiction. I find that reading history takes me away from trading - especially biographies of people. You need to find things that you like to do that will pull your mind and body away from trading.

To watch Bob being interviewed and ask him questions live, save your seat in one of our upcoming Friday live sessions here - TradeZero Live Sessions

Disclaimer: Live Sessions (hereafter referred to as the “Content”) are produced by TradeZero. The Content may include the views and opinions of TradeZero and a third-party participant, Bob Iaccino. Bob Iaccino is compensated by TradeZero for participating in the Content. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is notresponsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security. Trading securities can involve high risk and potential loss of funds. Furthermore, trading on margin is for experienced investors and traders only as the amount you may lose can be greater than your initial investment. Likewise, short selling as a securities trading strategy is extremely risky and can lead to potentially unlimited losses. Options trading is not suitable for all investors as it can involve risk that may expose investors to significant losses. Please read the Characteristics and Risk of Standardized Options, also known as the options disclosure document (ODD) at https://www.theocc.com/Company-Information/Documents-and-Archives/Options-Disclosure-Document before deciding to engage in options trading. TradeZero provides self-directed brokerage accounts to customers through its operating affiliates: TradeZero America, Inc. (“TZA”), a United States broker dealer, registered with the Securities and Exchange Commission (SEC) and member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation(SIPC); TradeZero, Inc., a Bahamian broker dealer, registered with the Securities Commission of the Bahamas; and TradeZero Canada Securities ULC, a Canadian broker dealer, member firm of the Investment Industry Regulatory Organization of Canada (IIROC) and member of the Canadian Investor Protection Fund (CIPF).